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Security Watch: January 15, 2001

15 January 2001, Volume 2, Number 2
PUTIN, Aliyev COMPROMISE ON CASPIAN. On the first visit by a Russian president to Azerbaijan, Vladimir Putin signed an agreement with his host, Heidar Aliev, on the status of the Caspian Sea, "Segodnya" reported on 10 January. The accord provides for a division of the sea floor as Azerbaijan had wanted but for joint exploitation of the water area as Russia has insisted. But precisely because it is a compromise and because there are many unanswered questions, the Moscow paper noted that the real status of the Caspian remains open. Even more, the fact that Russia entered into a bilateral accord -- rather than a multilateral one which it has insisted on -- suggests that Putin had to compromise, the paper concluded.

RUSSIA WANTS PERMANENT MILITARY PRESENCE IN AZERBAIJAN. Defense Ministry sources told Interfax on 10 January that Moscow wants to keep its Gabala radar station for at least 20 more years. During their talks, Putin and Aliyev discussed this possibility, with Putin aide Sergei Prikhodko telling the press that the Russian president had offered to train its military officers and provide spare parts as part of a lease arrangement. Despite Moscow's public insistence that Gabala is a key part of Russia's early warning system, Russian officers have admitted privately that there is no strategic missile threat from the south and that the station in fact is simply being used to monitor the southern flank of NATO and U.S. naval operations in the Persian Gulf.

MOSCOW MULLING 'GREATER CAUCASUS' STRATEGY. Duma Defense Committee Chairman General Andrei Nikolaev told "Parlamentskaya gazeta" on 12 January that Russia must recognize that the northern and southern Caucasus are part of a single security region and must be addressed as one area. Unless it views the region as the "Greater Caucasus," Nikolaev said, the U.S. and other Western governments and firms will continue to expand their influence in the region. Indeed, he pointed out, Baku's coziness with Turkey and Georgia's interest in NATO reflects how much Russia has already lost. Russia, he said, cannot allow these trends to continue.

BELARUS HAS ITS CLAIMS ON KALININGRAD. Belarusian Deputy Premier Leonid Kozik told ITAR-TASS on 11 January that Kaliningrad Oblast must be the subject of a special jurisdiction of the "future Russian-Belarus union state." Kozik added that special jurisdiction for Kaliningrad will develop from its port as an "alternative to the Polish and Lithuanian ports."

MOSCOW PLAYS UP 'BALKAN SYNDROME.' Vladimir Putin was only one of a chorus of Russian officials and politicians who have expressed their concern and anger about reports that depleted uranium shells used by NATO in Kosova and Yugoslavia have had a negative impact on the health of peacekeepers and the local population, Russian media report. Foreign Minister Igor Ivanov has demanded that the UN investigate the case. Boris Gryzlov, the leader of the Duma's pro-government faction Edinstvo, said that even though it was doubtful that such shells could cause leukemia as some have charged, NATO must fear "full responsibility" for the toxicity of these materials and the investigation of this problem.

MOSCOW PUSHES UP PRICE OF PALLADIUM. Under cover of the debates about its non-payment to the Paris Club of creditors, Russia helped push the price of palladium up from $800 an ounce to over $1000, "Kommersant" reported on 10 January. In 2000, Russia produced 180 of the 260 tons of world production and thus is in a position to drive prices up. According to the paper, the only restriction on Moscow's actions is that if it causes the price to rise too far then importers will seek some substitution for it.

RUSSIA HAS RECORD TRADE BALANCE. Russia ended the year 2000 with a record positive trade balance of $62.5 billion, up from $36.3 billion the year before, Russian agencies reported on 11 January. During the first 11 months of 2000 exports reached some $92.7 billion while imports were only $30.2 billion. Russia's gold and hard currency reserves rose almost three times to $27.95 billion in December. All of these figures call into question Moscow's profession that it cannot pay the Paris Club of creditor countries the $5.9 billion it is scheduled to pay in 2001.

RUSSIA MAY PULL OUT OF U.S. STEEL ACCORD. Maksim Medvedkov, the deputy science and technology minister, said that Russian steel producers want Moscow to pull out of an anti-dumping accord with the U.S., Finmark reported on 10 January. Under that agreement, Russia had agreed to restrict exports to the U.S. in return for Washington's promise not to impose special duties on Russian government subsidized steel exports. Medvedkov said that Russian producers continue to experience "discrimination" in the U.S. market and that the Russian government may denounce the earlier accord without waiting for an American response.

PUTIN REPLACES ST. PETERSBURG FSB CHIEF. President Vladimir Putin has named Lieutenant General Sergei Smirnov to replace Aleksandr Grigoriev as head of the St. Petersburg branch of the FSB, "Segodnya" reported on 10 January. Supposedly there had been a conflict between Grigoriev and another Putin loyalist, Viktor Cherkesov, who is the presidential envoy in the Northwest Federal District. Grigoriev apparently angered Cherkesov because of the FSB's investigation of the latter's ties to the Tambov organized crime group, the paper said. Grigoriev had also expressed skepticism about charges that the former deputy head of the city council, Yuri Shutov, was involved organizing contract murders. Shutov fell from favor and was arrested after Putin, then FSB director, secretly visited Switzerland in 1999 to cover up Kremlin corruption cases, the paper said.

PUTIN REWARDS FSB OFFICER FOR CHECHEN SERVICES. By an as-yet unpublished decree, President Putin presented FSB Deputy Director German Ugryumov with the Hero of Russia order for his work in Chechnya, "Moskovsky komsomolets" reported on 12 January. An admiral, Ugryumov currently supervises the FSB Department for the Protection of Constitutional Order and the Struggle Against Terrorism as well as being in charge of the Alfa and Vympel special forces units.

AEROSPACE ENTERPRISE TO BE MERGED. Rosaviakosmos head Yuri Koptev said that three of Russia's main aerospace companies: "Sukhoi," "Yakovlev," and "MiG" will be merged in order to allow Russia to develop a fifth generation multifunctional tactical fighter plane, Rusbiznesconsulting reported on 11 January. The merger plan was announced after Air Force Commander Anatoly Kornukov acknowledged that two prototypes made by Sukho and MiG had failed to meet specifications.

NAVY EXPANDS RANGE OF ACTIVITIES. Saying that he wants to resume "the combat mission of the navy on the world ocean," the Russian navy's commander in chief, Admiral Vladimir Kuoyedov, told that Moscow would dispatch the Pacific fleet to the Indian and Pacific oceans in February and March. He said that his plan was to restore the Russian Navy to where it was 40 years ago: "It is long past time to talk only about protecting our economic interests," he said. "The time has come to protect our interests in the oceans as such."

STEPASHIN SAYS INFORMATION SECURITY MORE IMPORTANT THAN PROFITS. Audit Chamber chairman Sergei Stepashin told RIA-Novosti on 11 January that his agency had completed its probe of the second national television channel VGTRK. He observed that "one should not require that the VGTRK be profitable" but rather that it help maintain the security of the country's national information space.

BEREZOVSKY SELLS STAKE IN ORT TO STATE. Media magnate Boris Berezovsky told "Kommersant" on 11 January that he was completing the sale of his 49 percent stake in ORT. He is selling the shares to Roman Abramovich for $80 million, but Berezovsky said that Abramovich is simply "a middleman" for the government and that the sale will bring ORT under complete state control.

GOVERNMENT EXPANDS CONTROL OVER TELECOMMUNICATIONS. The Russian government plans to use its Svyazinvest holding company to expand its control over the national telecommunications sector, "Izvestiya" reported on 9 January. It plans to set up a state-owned national Internet service provider and to take over much of the cellular phone market.

AUTONOMOUS DISTRICTS MAY BE ELIMINATED. "Nezavisimaya gazeta" reported on 10 January that the Russian government has drafted a plan that will eliminate the autonomous districts -- including the resource rich Taimyr, Evenk, and Jewish Autonomous Oblasts -- by reabsorbing them into the oblasts and krais on which they are located. In addition, the draft plan reportedly calls for allowing some of the federal subjects to expand plans to absorb all or part of their neighbors.

ZYUGANOV SAYS COMMUNISTS WILL TRY TO PENETRATE PUBLIC INSTITUTIONS. KPRF leader Gennadii Zyuganov said that his party plans to refrain from public protests but rather will seek to install its members "in all institutions and niches of our public life," ITAR-TASS reported on 12 January. He acknowledged that this shift in tactics reflected the party's inability over the last decade "to mobilize the masses and bring them into the streets." Russia's current reality, he said, "is much more complex." But on one question, Zyuganov is proving to be a close ally of the government. He told RTR on 10 January that Moscow was right to suspend payments to the Paris Club. And on another, the free sale of land, he said that President Vladimir Putin had promised not to insist on new legislation in this area.

TAX POLICE TO BLOCK FRONT COMPANY ACCOUNTS. Vyacheslav Soltaganov, the head of the Federal Tax Police Service (FSNP), told "Vek," no. 2, that his agency plans to seize the foreign currency accounts held by front companies which have been using these vehicles to send capital abroad. He added that some are also being used to hide incomes and avoid taxes. As a result of his efforts, Soltaganov said, the FSNP has recovered 44 billions rubles ($1.571 billion).

PUTIN CALLED PROSECUTORS TO DEFEND STATE INTERESTS. Addressing to a conference of Russian prosecutors, President Vladimir Putin urged them to defend both state interests and human rights, RIA-novosti reported on 11 January. He said that they should pay special attention to protecting all forms of property. But as for economic crimes, Putin suggested that the procuracy was not the place for coordinating such cases over the longer term and that a new structure should and will be created.

EXTENT OF CORRUPTION WORRIES PROSECUTOR GENERAL... Prosecutor-General Vladimir Ustinov told the same audience that the shadow economy now exceeds 50 percent of the country's GDP, Interfax reported on 12 January. That worries him both legally and because of the amount of "unpaid taxes and fees" it represents. He added that corruption in the state bureaucracy had reached unprecedented proportions because law enforcement efforts have concentrated only on the actions of junior officials. And he acknowledged that the real amount of crime in Russia is far greater than official statistics suggest.

...AS STROEV POINTS TO ITS INTERNATIONAL IMPLICATIONS. Federation Council Speaker Yegor Stroev said that corruption in Russia is now so widespread that it has an impact on Russia's standing in the world, ITAR-TASS reported on 12 January. He predicted that the situation will only get worse over the next five to seven years and that during this period Russia will become the major source of a new generation of the world's organized crime figures. Stroev also complained that the Russian procuracy had failed to explain who was responsible for the August 1998 default.


By Paul Goble

Since the Soviet Union collapsed a decade ago, governments in the region have devoted a great deal of attention to converting what had been internal administrative borders into international boundaries. But only now are they beginning to wrestle with yet another kind of border problem: the precise delineation of administrative lines within their own countries.

In an interview published in Moscow's "Segodnya" newspaper on 4 January, Aleksandr Blokhin, Russia's minister for federation affairs and nationality and migration policy, is quoted as saying that his staff is preparing draft legislation on the regulation of administrative borders within the Russian Federation.

According to Blokhin, most of the subjects of the federation -- the oblasts, krais, and republics -- have regulated their borders with each other on the basis of bilateral agreements. But he added that there remain "approximately 20" places where there are no such agreements and hence where the potential for disagreements and disputes exists.

In Soviet times such administrative borders were both frequently changed and widely ignored by both Moscow and local officials. The central government controlled all taxation and distribution and consequently these lines while sometimes a matter of local pride played a secondary role in the political and social life of the country. And it is not surprising that Moscow largely ignored this issue in the first post-Soviet years.

But there are three obvious reasons why the Russian government is devoting attention to the question of internal administrative boundaries now.

First, given President Vladimir Putin's efforts to recentralize control, he and others in Moscow are undoubtedly uncomfortable with a situation in which subjects of the federation might make deals with one another without Moscow's blessing or even involvement. Such spontaneous behavior on the part of the country's components would fly in the face of Putin's oft-expressed wish for greater central control in this areas as in others.

Second, even if the Russian Federation's subjects are reduced in number or in status compared to the situation under former President Boris Yeltsin, they are likely to become increasingly important both in terms of collecting taxes and distribution of resources.

As in the United States and other federations, the subjects of the Russian Federation appear likely to get some taxing powers and they already are the divisions on which resources from Moscow are being distributed. If the regions or republics were to remain able to redraw their own borders autonomously from Moscow, they could gain important leverage in this process at Moscow's expense.

Thus, for example, one region might give up a poorer area to another so that the former would bear fewer welfare expenses and the latter would be able to seek greater resources from Moscow itself. Such unregulated shifts could make central planning and budgeting almost impossible, especially if regional leaders were to decide that this was the best way to pursue their distinctive interests.

And third, addressing the question of internal administrative borders now may allow the Russian government to deal with two issues it has not yet been able to find an easy way to address. On the one hand, new legislation on redrawing internal administrative borders could set the state for the partition of Chechnya some have proposed between a loyalist north and a still independence-minded area in the mountainous south.

On the other hand, such legislation might allow the central authorities to overcome a constitutional problem they now face in their efforts to reduce the number of federal subjects. As Blokhin acknowledged in his "Segodnya" interview, such a change would require amending the constitution as each of the subjects is specified in that document.

But if Moscow were in a position to redefine the borders of the autonomous okrugs and even other subjects of the federation at will, it might then be able to achieve many of the same goals of reducing their status further without raising a red flag about the future nature of Russian federalism, which a discussion of amendments would inevitably do.

In any case, the Russian government's decision to prepare legislation on internal administrative borders underscores the fact that these lines on the map can sometimes be almost as significant as the international state boundaries to which Moscow and other capitals in the region have devoted so much attention.